As a real estate investor, you are probably familiar with the high rates and high points of private loans. Lengthy approval processes can cause you to miss out on investment opportunities, and strict lending criteria can make your ideal investments seem impossible. BluEleven Capital offers alternative financing for both inexperienced and experienced real estate investors. Our no-income mortgage loans allow you to qualify based on the cash flow of the property and not your income on your tax return.
When qualifying borrowers for no-income mortgages, there are several factors lenders usually take into account:
For many investors, these factors can make applying for a loan a grievous experience. For example, many real estate investors take on passive losses associated with their properties which can significantly reduce the income reported on their taxes. As such, they are at a disadvantage when applying for loans. A similar issue applies to self-employed individuals whose income is more difficult to accurately report.
The debt service coverage ratio is the property’s annual net operating income (NOI) compared to its annual mortgage debt service (annual debt obligation for the property). The DSCR is typically used by lenders to qualify a borrower for a real estate investment loan because it determines the borrower’s ability to repay the loan, also known as the income coverage.
When calculating the NOI, lenders often include other expenses in addition to the actual expenses of the property. Adding expenses such as market expenses, vacancy, and reserves for replacement, can lower the property’s NOI and create a less favorable DSCR.
If the property’s DSCR does not meet the lender’s required minimum coverage, your loan will likely be denied. The other option is that the amount of the loan is significantly reduced to meet the minimum coverage amount which can make it nearly impossible to afford the investment property you have in mind and renders the loan useless for your purposes.
Many individuals who want to begin investing or expand their portfolio become discouraged by these restrictions, but there are other ways to secure the funds you need. If you’re wondering “can I buy a house with no-income verification?” or “can I get a mortgage without a tax return”, the answer is yes, and you might have several options.
Whether you are a seasoned or first-time real estate investor, non-qualified mortgage loans (Non-QM), or no-income investment property loans, may be a better option for you. Because the guidelines are less restrictive for these types of loans, you are able to seize investment opportunities when they arise, regardless of your current income status.
Non-QM investor loans also allow us to use more flexibility when underwriting loans, so more individuals can qualify. If you have been denied a loan based on your DSCR, you should consider applying for a no-income loan.
Many lenders require at least 1.25 DSCR to qualify for a commercial or apartment loan. However, Blu Eleven Capital offers loans for DSCR as low as 1.0 that allow you to qualify on the cash flow of the property only and we even have no-ratio DSCR loans where teh DSCR isn’t taken into account.
Traditionally, the fear with low DSCRs is that a borrower would not be able to pay back a loan, which was the case with the recession in 2008. Many borrowers were approved for loans when they did not have the working capital to pay them back, causing them to default on their mortgage loans.
However, times have changed and we understand the nature of real estate investment. Since the majority of real estate investors typically flip homes quickly or use rental income to repay the mortgages of their investment properties, these loans exclude investors from the rules of repayment that are typically required.
An is a popular solution for investors who want to qualify without income verification. Asset-based loans leverage your assets instead of relying on your income. As such, they do not require a tax return or proof of income to purchase a home. This option is popular amongst self-employed investors as well as retirees looking to buy a second home as an investment property.
In addition to an asset-based mortgage, you may also consider awhich allows you to verify your income, and qualify for a loan, using your bank statements instead of tax returns, W2s,and pay stubs. These loans are especially beneficial for business owners or self-employed individuals who want to buy or refinance a home using their true net income.
If you have recently experienced a credit event due to the recession or extenuating circumstances, you may consider a recent credit event loan. Our recent credit event loans allow you to borrow despite bankruptcy, short sale, or foreclosure so you can begin to rebuild your investment portfolio. We understand that some investments turn sour in a stroke of bad luck and that one bad investment decision does not define a borrower’s reputation. Instead, we believe that investors should have the opportunity to redeem themselves, and we’re here to help you do so.